Fund of Fortnight
Ninad RamdasiCategories: DSIJ_Magazine_Web, DSIJMagazine_App, Fund of Fortnight, MF - DSIJ Recommendation, Mutual Fund
Every fortnight, we recommend one open-ended equity diversified fund that has the best potential of returns for the next one year considering its constituents remain the same.
This is our mutual fund recommendation. Every fortnight, we recommend one open-ended equity diversified fund that has the best potential of returns for the next one year considering its constituents remain the same.
Reason for recommendation
After enjoying a remarkable run over the past few quarters, the equity market appears to be hitting a roadblock. Recently, we observed a sharp correction in the market, mainly due to global factors. In this period of heightened volatility, investing in dividend yield funds can be a prudent choice, as they typically have a lower beta compared to other equity funds. Hence, our recommendation for this issue is ICICI Prudential Dividend Yield Equity Fund.
The fund has demonstrated an impressive performance, significantly outpacing its category average across most time periods. In a six-month period, the fund has achieved a return of 20.81 per cent, outperforming the category average of 19.24 per cent. Over one year, the fund has delivered a substantial 56.4 per cent return, well above the category average of 48.76 per cent. For a three-year period, the fund has posted a return of 30.91 per cent versus the category average of 25.02 per cent.
In terms of sectoral allocation, financials dominate the portfolio, accounting for 22.78 per cent. The energy sector follows closely with a 17.41 per cent allocation while the automobile sector holds 7.82 per cent. In terms of individual holdings, the fund has a well-diversified portfolio with strong bets on industry leaders. ICICI Bank is the top holding at 7.44 per cent. NTPC comes next with 7.29 per cent, reflecting a strategic investment in a leading energy company. The fund stands out within its category due to its superior risk-adjusted performance metrics. The fund’s alpha is 11.24, significantly higher than the category average of 7.22. Additionally, the fund’s beta is 0.82, much lower than the category average of 1.49, suggesting that the fund is less sensitive to market volatility and provides a more stable investment. The fund has one of the lowest expense ratios. Hence, we recommend allocating a portion of your investment portfolio to the fund to benefit from its robust growth potential and stability.
